What changed in this filing

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Item 1. Financial Statements

2024-11-13 compared with 2024-08-12 · 325 added, 168 removed, 529 unchanged (48% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable

Accounts receivable, current portion

Inventory deposits

1 unchanged sentence

Total Current Assets

Accounts receivable, non-current portion

Property and equipment, net

2 unchanged sentences

Intangible assets, net

Right-of-use asset, net

Deferred financing costs, net

Operating lease right-of-use asset

Finance lease right-of-use asset, net

Deferred financing costs

Liabilities and Stockholders’ Equity (Deficit)

3 unchanged sentences

Accrued issuable equity

Lease liabilities, current portion

Operating lease liabilities, current portion

Finance lease liability, current portion

Notes payable, net of discount, current portion

Prepaid advance liability, net of discount, current portion

Deferred revenue

Total Current Liabilities

Lease liabilities, non-current portion

Operating lease liabilities, non-current portion

Finance lease liability, non-current portion

Notes payable, non-current portion

6 unchanged sentences

Series A Preferred Stock, 1,000,000 shares designated;

730,000 and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively;

730,000 and 0 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively;

Series B Convertible Preferred Stock, 31,000 shares designated;

none issued and outstanding at June 30, 2024 and December 31, 2023

none issued and outstanding at September 30, 2024 and December 31, 2023

Series C Preferred Stock, 400 shares designated;

none issued and outstanding at June 30, 2024 and December 31, 2023

none issued and outstanding at September 30, 2024 and December 31, 2023

Series D Preferred Stock, 650 shares designated;

none issued and outstanding at June 30, 2024 and December 31, 2023

none issued and outstanding at September 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 500,000,000 shares authorized;

188,086,914 and 187,955,752 shares issued and outstanding at June 30, 2024, respectively;

201,313,770 and 201,182,608 shares issued and outstanding at September 30, 2024, respectively;

134,031,669 and 133,900,507 shares issued and outstanding at December 31, 2023, respectively

1 unchanged sentence

Treasury stock, at cost;

131,162 shares held at June 30, 2024 and December 31, 2023.

131,162 shares held at September 30, 2024 and December 31, 2023

Accumulated deficit

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenue

18 unchanged sentences

( 5,562,274 )

( 12,903,168 )

( 18,500,127 )

Net Loss Per Share

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Preferred Stock

8 unchanged sentences

Common stock issued for cash pursuant to Advance Notices (2)

Warrants issued in connection with note payable

Stock-based compensation:

9 unchanged sentences

( 71,296,470 )

Warrants isued in connection with note payable

Warrants isued for consulting services in connection with issuance of notes payable

Common stock issued for cash pursuant to Advance Notices (3)

8 unchanged sentences

( 77,186,998 )

Common stock issued for cash pursuant to ATM offering (4)

Stock-based compensation:

Restricted stock units vested

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

( 2,003,764 )

Balance - September 30, 2024

( 79,190,762 )

(1) Represents gross proceeds of $ 6,068,407 , less issuance costs of $ 13,577 .

1 unchanged sentence

(3) Represents gross proceeds of $ 6,194,299 , less issuance costs of $ 52,792 .

(4) Represents gross proceeds of $ 3,431,090 , less issuance costs $ 136,631 .

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, continued

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Treasury Stock

22 unchanged sentences

( 55,531,891 )

Common stock issued pursuant to the equity financing:

For cash, net of issuance costs (1)

Stock-based compensation:

Restricted stock awards granted

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

( 5,562,274 )

Balance - September 30, 2023

( 61,094,165 )

(1) Equity financing gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 .

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows From Operating Activities:

3 unchanged sentences

Amortization of debt discount

Non-cash lease expense

Non-cash operating lease expense

Loss on debt extinguishment

6 unchanged sentences

( 2,147,542 )

( 1,046,532 )

Inventory deposits

4 unchanged sentences

Accrued expenses and other current liabilities

Lease liabilities

Operating lease liabilities

Deferred revenue

9 unchanged sentences

Cash Flows from Financing Activities:

Proceeds from equity financing

Issuance costs on equity financing

Proceeds from ATM equity financing

Issuance costs on ATM equity financing

Proceeds from the SEPA

1 unchanged sentence

Issuance costs on prepaid advance liability

Net proceeds from notes payable (1)

Repayments of prepaid advance liability

( 1,575,000 )

Proceeds from notes payable (1)

Issuance costs on notes payable

2 unchanged sentences

Repurchase of common stock

Payments for deferred financing costs

Repayment of finance lease liabilty

Net Cash Provided By Financing Activities

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

For the Six Months Ended

For the Nine Months Ended

September 30,

Supplemental Disclosures of Cash Flow Information:

1 unchanged sentence

Non-cash investing and financing activities:

Right-of-use asset for lease liability

Restricted stock awards converted to restricted stock units

Restricted stock units vested

Original issue discount on indebtedness

Common stock issued in satisfaction of prepaid advance liability and interest

Deposits applied to purchases of property and equipment

Additions to property and equipment included in accounts payable and accrued expenses

Equipment deposits included in accounts payable

Deferred financing costs charged to additional paid-in capital

Right-of-use asset for operating lease liability

Original issue discount on indebtedness

Deferred financing costs included in accounts payable

Value of warrants issued in connection with notes payable

Accrued deferred financing costs

Deferred financing costs charged to additional paid-in capital

Additions to property and equipment included in note payable

Additions to property and equipment included in accounts payable and accrued expenses

Common stock issued in satisfaction of accrued issuable equity

Right-of-use asset for finance lease liability

Restricted stock awards converted to restricted stock units

Preferred shares issued for no consideration

Common shares issued for restricted stock units vested

Deposits applied to purchases of property and equipment

Equipment deposits included in accounts payable

Accrual of equity financing issuance costs

The accompanying notes are an integral part of these condensed consolidated financial statements.

11 unchanged sentences

GAAP for annual financial statements.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2024, and for the three and six months ended June 30, 2024 and 2023.

The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the operating results for the full year ending December 31, 2024, or any other period.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023.

The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the operating results for the full year ending December 31, 2024, or any other period.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2023 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on April 12, 2024.

3 unchanged sentences

Going Concern and Management’s Liquidity Plans

As of June 30, 2024, the Company had cash of $ 1,016,943 and a working capital deficit of $ 2,381,478 .

For the six months ended June 30, 2024, the Company incurred a net loss of $ 10,899,404 and used cash in operating activities of $ 9,198,453 .

As of September 30, 2024, the Company had cash of $ 912,417 and a working capital deficit of $ 1,157,755 .

For the nine months ended September 30, 2024, the Company incurred a net loss of $ 12,903,168 and used cash in operating activities of $ 12,498,818 .

The Company’s primary source of liquidity has historically been cash generated from equity and debt offerings along with cash flows from revenue.

Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet future financial obligations as they become due within one year after the date that these financial statements are issued.

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

However, since the Company’s inception, we have had a history of recurring net losses from operations, recurring use of cash in operating activities and working capital deficits.

Future cash requirements for our current liabilities include $ 4,811,565 for accounts payable and accrued expenses, $ 784,006 for secured promissory notes (see Note 9 – Notes Payable) and $ 487,369 for future payments under operating leases.

Future cash requirements for long-term liabilities include $ 1,059,898 for future payments under operating leases and $ 250,000 for unsecured promissory notes.

On December 20, 2023, the Company received a notice of noncompliance from NYSE Regulation (“NYSE”) stating it is not in compliance with Section 1003(a)(iii) in the NYSE American Company Guide (the “Company Guide”) since the Company reported stockholders’ equity of $ 1,200,172 at September 30, 2023, and losses from continuing operations and/or net losses in its five most recent fiscal years.

On February 12, 2024, the Company received a second notice letter from NYSE stating it is not in compliance with Section 1003 (f)(v) of the Company guide since the Company’s securities were trading at an average of less than $ 0.20 per share for 30 days.

The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

However, since the Company’s inception, it has had a history of recurring net losses from operations, recurring use of cash in operating activities and working capital deficits.

Future cash requirements for our current liabilities include $ 4,375,171 for accounts payable and accrued expenses, $ 1,145,529 for secured promissory notes (see Note 9 – Notes Payable), $ 507,959 for future payments under financing and operating leases and $ 100,000 for unsecured promissory notes.

Future cash requirements for long-term liabilities include $ 930,361 for future payments under financing and operating leases and $ 266,604 for unsecured promissory notes.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 20, 2023, the Company received a notice of noncompliance from NYSE Regulation (“NYSE”) stating that it is not in compliance with Section 1003(a)(iii) in the NYSE American Company Guide (the “Company Guide”) since the Company reported stockholders’ equity of $ 1,200,172 at September 30, 2023, and losses from continuing operations and/or net losses in its five most recent fiscal years.

On March 5, 2024, the Company received a notification from the NYSE that the Company’s plan to regain compliance with Section 1003 (a)(iii) of the Company Guide was accepted and so long as the Company meets its interim objectives, the Company will have until June 20, 2025, to regain compliance with the minimum stockholders’ equity requirement.

2 unchanged sentences

Management’s plans to mitigate the factors which raise substantial doubt include (i) revenue growth, (ii) reducing operating expenses through careful cost management, and (iii) raising additional funds through future financings.

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock having an aggregate offering price of up to $ 20,000,000 in “at the market” offerings through or to the Agent.

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “Sales Agreement”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock having an aggregate offering price of up to $ 20,000,000 in “at the market” offerings through or to the Agent (the “ATM”).

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from the Company of 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement.

During the period from July 3, 2024, through August 9, 2024, the Company issued a total of 4,953,867 shares of common stock pursuant to the Sales Agreement for aggregate proceeds of $ 1,416,940 .

See Note 12 – Subsequent Events – At the Market Offering for additional information.

The Agent receives a commission from the Company of 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement.

During the period from July 3, 2024, through September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the Sales Agreement for aggregate gross proceeds of $ 3,431,090 .

Furthermore, the Company received aggregate gross proceeds of $ 4,319,699 for 13,045,200 shares issued during the period from October 1, 2024 through November 12, 2024.

See Note 10 – Stockholders’ Equity (Deficit) – At the Market Offering for additional information.

The Company’s ability to continue as a going concern is dependent upon its ability to successfully execute the aforementioned initiatives.

11 unchanged sentences

The Company’s concentrations of credit risk also include concentrations from key customers and vendors.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash Concentrations

2 unchanged sentences

Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution.

There were uninsured balances of $ 516,943 and $ 694,764 as of June 30, 2024 and December 31, 2023, respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were uninsured balances of $ 487,367 and $ 694,764 as of September 30, 2024 and December 31, 2023, respectively.

Customer and Revenue Concentrations

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Less than 10%

3 unchanged sentences

Vendor Concentrations

The Company had vendors whose purchases of inventory individually represented 10% or more of the Company’s total purchases of inventory, for the three and six months ended June 30, 2024 and 2023, as follows:

The Company had vendors whose purchases of inventory individually represented 10% or more of the Company’s total purchases of inventory, for the three and nine months ended September 30, 2024 and 2023, as follows:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Less than 10%

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

Accounts receivable are carried at their contractual amounts, less an estimate for credit losses.

As of June 30, 2024 and December 31, 2023, no allowances for credit losses were determined to be necessary.

As of September 30, 2024 and December 31, 2023, no allowances for credit losses were determined to be necessary.

Management estimates the allowance for credit losses based on existing economic conditions, the financial conditions of the customers, and the amount and age of past due accounts.

1 unchanged sentence

Past due accounts are generally written off against the allowance for credit losses only after all collection attempts have been exhausted.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company capitalizes inventory costs associated with products when future commercialization is considered probable, and a future economic benefit is expected to be realized.

9 unchanged sentences

These payments are recorded as inventory deposits until the goods are received and these costs are included in the current asset section of the condensed consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, inventory deposits were $ 10,883 and $ 27,500 , respectively.

As of September 30, 2024 and December 31, 2023, the Company had inventory deposits of $ 20,925 and $ 27,500 , respectively.

Finished goods inventory is held on-site at the San Diego, California and Webster, Texas locations.

Certain raw materials are held off-site with certain contract manufacturers.

Inventory at June 30, 2024 and December 31, 2023 was comprised of the following:

Inventory at September 30, 2024 and December 31, 2023 was comprised of the following:

September 30,

Raw materials

10 unchanged sentences

Allocate the transaction price to the performance obligations in the contract;

Recognize revenue when the company satisfies a performance obligation.

The Company recognizes revenue primarily from the following different types of contracts:

● Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at the time it ships the product to the customer.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recognize revenue when the company satisfies a performance obligation.

The Company recognizes revenue primarily from the following different types of contracts:

● Contract services – Revenue is recognized pursuant to the terms of each individual contract when the Company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract.

Contract services revenue that is recognized over time may be recognized using the input method, based on labor hours expended, or using the output method based on milestones achieved, depending on the contract.

● IP license – Revenue is recognized pursuant to the type of intellectual property (“IP”) being licensed for each individual contract when the company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract.

IP license revenue for the right to access symbolic IP is recognized over time and the right to use functional IP is recognized at a point in time.

License fees – revenue from the right to use IP is recognized immediately at a point in time.

Minimum royalty fees – revenue is recognized immediately at a point in time.

Royalty fees above the minimum – revenue is recognized when and if amounts become probable and estimable.

Software maintenance fees – revenue is recognized over time over the term of the agreement.

The following table summarizes the Company’s revenue recognized by type of contract in its condensed consolidated statements of operations:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Revenue Recognized at a Point in Time:

4 unchanged sentences

Total Revenue

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

License Agreement

On September 29, 2024, the Company entered into a three-year licensing agreement (the “Agreement”) with a customer located in Japan to use its KULR VIBE software to measure and reduce fan vibration levels.

The Agreement gives the customer the exclusive license to use the software in Japan (for Japanese customers) for the sole purpose of operating the Balancer.

The Balancer is a hardware device used to measure vibration levels.

Pursuant to this Agreement, the Company received a one-time, non-refundable license fee for the right to use the IP of $ 500,000 for which revenue was recognized immediately.

The customer will pay royalty fees to the Company of $ 0.20 per unit of any rotational system balanced by a Balancer, and 3 % of gross sales of all Balancers the customer manufactures and sells to a third party.

The customer will make quarterly royalty payments to the company which may vary from period to period, but the minimum payment of $ 50,000 per quarter ($ 600,000 over the three-year life of the Agreement) is guaranteed.

Since the payment of the minimum royalty occurs significantly after performance, this indicates a significant financing component.

Therefore, the Company immediately recognized revenue in an amount equal to the present value ($ 528,767 ) of the $ 600,000 to be received, using the prevailing interest rate in the relevant market (prime rate) of 8.0 %.

Royalty fees above the minimum amount will be recognized when and if amounts become probable and estimable.

While the Agreement contains a software maintenance provision, the Company expects the resources that will be dedicated to the software maintenance services to be negligible and determined an amount to be allocated to this software maintenance performance obligation to be de minimis.

Net Loss Per Common Share

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

( 2,003,764 )

9 unchanged sentences

Accrued issuable equity

Vested unissued restricted stock units

Denominator for basic and diluted net loss per share

4 unchanged sentences

The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

September 30,

Prepaid advance liability (1)

2 unchanged sentences

(1) Shares issuable estimated using the floor price of $ 0.75 per share pursuant to the supplemental agreement to the SEPA (see Note 6 – Prepaid Advance Liability).

Operating Leases

The Company leases properties under operating leases.

Operating and Finance Leases

The Company determines if an arrangement is a lease or contains a lease at inception.

For leases in effect upon adoption of Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” at January 1, 2020 and for any leases commencing thereafter, the Company recognizes a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”.

The lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate.

The right-of-use asset is measured at the amount of the lease liability adjusted for any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset.

Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.

The Company elected the accounting policy to include both the lease and non-lease components of the agreements as a single component and account for them as a lease.

The lease liability is measured at the present value of the remaining lease payments, discounted at either (1) the rate implicit in the lease, if available, or (2) the Company’s incremental borrowing rate.

The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset.

Classification criteria in Topic 842 is applied in order to determine whether the lease is a finance lease or an operating lease.

Operating lease expense is recorded on a straight-line basis over the life of the lease and is included in research and development and general and administrative expenses on the accompanying statements of operations.

Finance lease right-of-use assets are depreciated on a straight-line base over the estimated useful life of the asset;

the depreciation expense is included in research and development expense on the accompanying statements of operations.

Finance lease liabilities are subsequently remeasured by increasing the liability to reflect interest accrued during a period and decreasing the liability to reflect payments made during the period.

Interest expense incurred on finance leases is included in interest expense on the statements of operations.

Reclassifications

8 unchanged sentences

Public entities with a single reporting segment are required to provide both the new disclosures and all of the existing disclosures required under ASC 280.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

The guidance is effective for fiscal years

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material impact on its financial condition, results of operations, or cash flows.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

3 unchanged sentences

The amendments in ASU 2023 – 09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted.

Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material impact on its financial condition, results of operations, or cash flows.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023–09.

8 unchanged sentences

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 30, 2024 and December 31, 2023, prepaid expenses and other current assets consisted of the following:

As of September 30, 2024 and December 31, 2023, prepaid expenses and other current assets consisted of the following:

September 30,

Compensation costs

Dues and subscriptions

Deferred expenses

Dues and subscriptions

Professional fees

8 unchanged sentences

NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of June 30, 2024 and December 31, 2023, accrued expenses and other current liabilities consisted of the following:

As of September 30, 2024 and December 31, 2023, accrued expenses and other current liabilities consisted of the following:

September 30,

Professional fees

Research and development

Payroll and vacation

Research and development

Inventory purchases

Sales tax payable

Interest payable

Board compensation

Securities fees

Refund due to customer

4 unchanged sentences

NOTE 5 – ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the six months ended June 30, 2024 is presented below:

For the Six Months Ended

June 30, 2024

A summary of the accrued issuable equity activity during the nine months ended September 30, 2024 is presented below:

For the Nine Months Ended

September 30, 2024

Beginning balance at January 1, 2024

Mark-to-market

Fair value at June 30, 2024

During the six months ended June 30, 2024, the Company became obligated to issue a fixed number of shares of common stock of the Company as consideration for services provided by an employee pursuant to a contractual arrangement previously entered into with the employee.

Shares issued in satisfaction of accrued issuable equity

Fair value at September 30, 2024

During the nine months ended September 30, 2024, the Company became obligated to issue a fixed number of shares of common stock of the Company as consideration for services provided by an employee pursuant to a contractual arrangement previously entered into with the employee.

On the date the contract was entered into, the estimated fair value of the shares to be issued was an aggregate of $ 87,737 based on the quoted market prices of the shares.

The Company recorded losses in the aggregate amount of $ 2,737 and $ 15,739 during the three and six months ended June 30, 2024, respectively, and recorded gains in the aggregate amount of $ 156,652 and $ 220,760 during the three and six months ended June 30, 2023, respectively, related to changes in the fair value of accrued issuable equity (see Note 10 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of June 30, 2024, was $ 82,116 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

During the nine months ended September 30, 2024, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 80,000 of its shares for an aggregate fair value of $ 26,400 , measured as of the settlement date based on the quoted market prices of the shares.

The Company recorded (losses) gains in the aggregate amount of $ 13,437 and $( 2,302 ) during the three and nine months ended September 30, 2024, respectively, and recorded (losses) gains in the aggregate amount of $( 42,773 ) and $ 177,987 during the three and nine months ended September 30, 2023, respectively, related to changes in the fair value of accrued issuable equity (see Note 10 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of September 30, 2024, was $ 76,641 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

KULR TECHNOLOGY GROUP, INC.

12 unchanged sentences

Amortization of debt discount

Balance, June 30, 2024

Balance, September 30, 2024

On January 9, 2024, the Company entered into a letter agreement with Yorkville to defer the Company’s December 31, 2023 (the “December Payment”) payment of $ 2,000,000 plus accrued interest and a 5 % cash payment premium until February 29, 2024.

On February 13, 2024, the Company and Yorkville entered into another agreement to extend all payment due dates and defer all payment obligations to December 31, 2024.

During the six months ended June 30, 2024, the Company issued 55,659,476 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $ 15,173,357 .

During the nine months ended September 30, 2024, the Company issued 55,659,476 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $ 15,173,357 .

Of the shares issued pursuant to the SEPA Advance Notices, 21,798,830 shares valued at $ 6,068,407 were issued in satisfaction of $ 5,918,430 of principal and $ 118,619 of accrued interest owed in connection with the Company’s prepaid advance liability.

The Company recorded $ 31,358 in extinguishment loss and charged $ 13,577 of deferred financing costs to additional paid-in capital in connection with the shares issued in satisfaction of the prepaid advance liability.

As of June 30, 2024, the Prepaid Advance Liability and the related accrued interest has been repaid in full and the SEPA has been terminated.

As of September 30, 2024, the Prepaid Advance Liability and the related accrued interest has been repaid in full and the SEPA has been terminated.

See Note 10 – Stockholders’ Equity (Deficit) - Standby Equity Purchase Agreement (“SEPA”) and Supplemental SEPA for additional information.

1 unchanged sentence

Deferred financing costs in the amount of $ 57,030 were charged to additional paid-in capital in connection with the shares issued for cash.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – LEASES

Operating Leases

On January 31, 2024, the initial lease for Webster, Texas dated January 18, 2023, expired.

5 unchanged sentences

The Company determined that the value of the lease liability and related right-of-use asset at inception was $ 1,085,497 , using an incremental borrowing rate of 10 %.

The Company paid a security deposit of $ 37,930 in connection with the Webster lease agreement which is recorded within the security deposits section of the balance sheet as of June 30, 2024.

The Company paid a security deposit of $ 37,930 in connection with the Webster lease agreement which is recorded within the security deposits section of the balance sheet as of September 30, 2024.

The Company also leases office space at 4863 Shawline Street, San Diego, CA 92111, pursuant to an operating lease which expired May 31, 2024 (the “San Diego Lease”).

On January 25, 2024, the Company entered into an amendment to the lease dated April 5, 2021, for the facility located at 4863 Shawline Street, San Diego, CA 92111 (the “First Renewal”).

Pursuant to the amendment, the lease is extended for a period of eighteen months commencing June 1, 2024, and terminating November 30, 2025.

Pursuant to the amendment, the lease was extended for a period of eighteen months commencing June 1, 2024, and terminating November 30, 2025.

Monthly rental payments under the amendment are $ 29,337 .

The Company determined that the value of the modified lease liability and related right-of-use asset to be $ 490,422 , using an incremental borrowing rate of 10 %.

As of June 30, 2024, the Company does not have any financing leases.

During the three and nine months ended September 30, 2024, operating lease expense was $ 150,846 and $ 377,554 , respectively.

During the three and nine months ended September 30, 2023, operating lease expense was $ 67,838 and $ 199,584 , respectively.

Finance Lease

During July 2024, the Company entered into a three - year lease agreement, (the “Equipment Lease”) for the lease of a copy machine (the “Equipment”).

The lease term began on July 18, 2024.

The monthly fixed lease payment is $ 220 .

The Equipment Lease includes a purchase option pursuant to which the Company can purchase the Equipment at the end of the lease term for $ 1 .

The Company recorded an ROU asset and lease liability in the amount of $ 7,768 upon the commencement of the Equipment Lease.

The Company recorded depreciation expense in the amount of $ 388 in connection with ROU assets held under the finance lease during the three and nine months ended September 30, 2024.

The Company recorded interest expense of $ 62 during the three and nine months ended September 30, 2024, in connection with its finance lease liability.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and six months ended June 30, 2024, operating lease expense was $ 111,591 and $ 226,708 , respectively.

During the three and six months ended June 30, 2023, operating lease expense was $ 65,873 and $ 131,746 , respectively.

Maturities of lease liabilities as of June 30, 2024, were as follows:

July 1, 2024 through December 31, 2024

Maturities of lease liabilities as of September 30, 2024, were as follows:

Operating Lease

Financing Lease

October 1, 2024 through December 31, 2024

Total future minimum lease payments

3 unchanged sentences

Lease liabilities, non current portion

Supplemental cash flow information related to the lease was as follows:

For the Six Months Ended

Supplemental cash flow information related to the operating and finance lease was as follows:

For the Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in operating activities

Operating cash flows from operating lease

Repayment of finance lease liability

Right-of-use assets obtained in exchange for lease obligations

Operating leases

Financing leases

Weighted Average Remaining Lease Term (Years)

Operating leases

Financing leases

Weighted Average Discount Rate

Operating leases

Financing leases

NOTE 8 – RELATED PARTY TRANSACTIONS

During the three and six months ended June 30, 2023, the Company recognized expenses of $ 16,755 and $ 27,210 , respectively, for consulting services provided by the father of the company’s Chief Technology Officer, which are included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

For the three and six months ended June 30, 2024, there were no expenses with related parties.

As of June 30, 2024 and December 31, 2023, the Company did no t have any accounts payable outstanding with related parties.

During the three and nine months ended September 30, 2023, the Company recognized expenses of $ 4,845 and $ 32,055 , respectively, for consulting services provided by the father of the Company’s Chief Technology Officer, which are included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

For the three and nine months ended September 30, 2024, there were no expenses with related parties.

As of September 30, 2024 and December 31, 2023, the Company did no t have any accounts payable outstanding with related parties.

KULR TECHNOLOGY GROUP, INC.

2 unchanged sentences

NOTE 9-NOTES PAYABLE

A summary of the notes payable activity during the six months ended June 30, 2024 is presented below:

A summary of the notes payable activity during the nine months ended September 30, 2024 is presented below:

Outstanding, January 1, 2024

1 unchanged sentence

Proceeds from promissory notes

Equipment received for note payable

Issuance costs paid in cash

Issuance costs to be paid in equity

Underwriting fees paid in cash

Issuance costs paid in equity

Underwriting fees

Repayments in cash

4 unchanged sentences

Notes payable, non-current portion

Total notes payable as of June 30, 2024

Total notes payable as of September 30, 2024

On January 22, 2024, the Company entered into a merchant cash advance agreement (the “Cash Advance Agreement”) whereby the Company received $ 504,900 of cash (net of underwriting fees of $ 35,100 ), and paid finder’s fees in cash of $ 21,600 and additional finder’s fees to be issued in equity, with the obligation to repay a total of $ 804,600 over thirty-two weekly payments of $ 25,144 , beginning January 30, 2024.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, is being amortized over thirty-two weeks using the effective interest rate method and an annualized effective interest rate of 217 %.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, were being amortized over thirty-two weeks using the effective interest rate method and an annualized effective interest rate of 217 %.

The Cash Advance Agreement was secured by the Company’s accounts receivable and related cash receipts.

On February 26, 2024, the parties added an addendum to the agreement for an early payoff discount whereby the Company will owe $ 756,000 if paid by March 22, 2024, or $ 783,000 if paid by April 22, 2024.

The Company did not take advantage of the early payoff discount and will continue making weekly payments over the original thirty-two-week term.

On July 11, 2024, the Company used proceeds from a new merchant cash advance to repay this cash advance in full.

See Note 12 – Subsequent Events – Merchant Cash Advance for additional information.

The Company did not take advantage of the early payoff discount and continued making weekly payments over the original thirty-two week term.

On July 11, 2024, the Company used proceeds from the Third Cash Advance Agreement to repay this cash advance in full.

On February 26, 2024, the Company entered into a merchant cash advance agreement (the “Second Cash Advance Agreement”) with the same lender mentioned above whereby the Company received $ 502,200 of cash (net of underwriting fees of $ 37,800 ), and paid finder’s fees in cash of $ 21,600 and additional finder’s fees to be issued in equity, with the obligation to repay a total of $ 804,600 over thirty weekly payments of $ 26,820 , beginning February 29, 2024.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, is being amortized over thirty weeks using the effective interest rate method and an annualized effective interest rate of 249 %.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, is being amortized over thirty weeks using the effective interest rate method and an annualized effective interest rate ranging from 240 % to 249 %.

The Second Cash Advance is secured by the Company’s accounts receivable and related cash receipts.

On July 11, 2024, the terms of the agreement were revised whereby the weekly repayment amounts will be reduced from $ 26,820 to $ 15,620 and the repayment period will be extended from September 27, 2024, to November 15, 2024.

On July 11, 2024, the terms of this agreement were revised whereby the weekly repayment amounts were reduced from $ 26,820 to $ 15,620 and the repayment period was extended from September 27, 2024, to November 15, 2024.

On April 2, 2024, the Company entered into an agreement (the “Promissory Note”), with a lender (the “Lender”), pursuant to which the Lender purchased an unsecured promissory note with an initial principal amount of $ 500,000 , for cash proceeds of $ 440,000 .

The Company recorded a debt discount of $ 60,000 , which consists of an original issue discount of $ 50,000 and cash issuance costs of $ 10,000 .

The debt discount was amortized using the effective interest rate method and an annualized effective interest rate of 26 %.

The Promissory Note carries an annual interest rate of 0 %, which shall increase to 15 % in the event of default, and has a maturity date of October 2, 2024, after which all outstanding principal and accrued interest will become immediately due.

On May 28, 2024, the Company repaid the Promissory Note in full, and recognized $ 60,000 of amortization expense related to the debt discount.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 4, 2024, the Company and the finder of the First and Second Cash Advance Agreements determined that the equity compensation would be by issuance of warrants to purchase up to 81,788 shares (the “First Warrant”) and up to 108,389 shares (the “Second Warrant”), respectively, of the Company’s common stock at an exercise price of $ 0.1852 per share and $ 0.139 per share, respectively.

3 unchanged sentences

The Warrants contain a cashless exercise provision in the form of a net share settlement, whereby, if, at the time the holder exercises the Warrants, there is no effective registration statement registering the common stock subject to the Warrants, the holder may elect to receive the number of shares of the Company’s common stock determined according to a formula set forth in the warrant agreements.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following assumptions were used in the Black-Scholes Model to measure the fair value of the warrants:

5 unchanged sentences

Expected volatility

The Company recorded a debt discount of $ 60,000 , which consists of an original issue discount of $ 50,000 and cash issuance costs of $ 10,000 .

On May 28, 2024, the Company repaid the Promissory Note in full, and recognized $ 60,000 of amortization expense related to the debt discount.

On April 9, 2024, the Company entered into a note purchase agreement pursuant to which the Company issued an unsecured promissory note with an initial principal amount of $ 200,000 and which matures on the first anniversary of its issuance.

2 unchanged sentences

In the event the promissory note is prepaid within 9 months of its issuance, the holder is entitled to the repayment of principal and cash payment of interest equal to 12 % of the prepayment amount instead of 16 %.

As of September 30, 2024, the principal balance of this promissory note was $ 100,000 .

On April 9, 2024, the Company entered into a Conditional Sale Agreement (the “Agreement”) to purchase a Haas Vertical Machining Center (the “Equipment”), pursuant to which the Company issued a promissory note with an initial principal amount of $ 42,788 .

The promissory note carries an imputed interest rate of 10 %.

The Company will make twenty four consecutive monthly installments of $ 2,003 , beginnning thirty days after the delivery of the Equipment.

The Equipment was received on June 17, 2024.

On July 11, 2024, the Company entered into a merchant cash advance agreement (the “Third Cash Advance Agreement”) whereby the Company received $ 758,850 of cash (net of underwriting fees of $ 40,000 and $ 201,150 used to pay the remaining balance of the first merchant cash advance), with the obligation to repay a total of $ 1,350,000 over forty - three weekly payments of $ 31,395 , beginning July 18, 2024.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount and is being amortized over forty - three weeks using the effective interest rate method and an annualized effective interest rate of 86 %.

The Third Cash Advance Agreement is secured by the Company’s accounts receivable and related cash receipts.

The agreement contains an early payoff discount whereby the Company will owe $ 1,230,000 if paid by August 11, 2024, or $ 1,310,000 if paid by September 11, 2024.

The Company did not take advantage of the early payoff discount and continued making weekly payments over the original forty - three week term.

In addition, the Third Cash Advance Agreement amended the Second Cash Advance Agreement to revise the repayment terms, whereby the weekly repayment amounts were reduced from $ 26,820 to $ 15,620 and the repayment period was extended from September 27, 2024, to November 15, 2024.

See Note 12 - Subesequent Events, for details related to notes payable.

NOTE 10 - STOCKHOLDERS’ EQUITY (DEFICIT)

2 unchanged sentences

Pursuant to the SEPA, the Company had the right, but not the obligation, to sell to Yorkville up to an aggregate of $ 50,000,000 of its shares of common stock, at the Company’s request any time during the commitment period commencing on May 13, 2022, and terminating on June 1, 2024.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Each sale (an “Advance”) that the Company requests under the SEPA (via an “Advance Notice”) may be for a number of shares of common stock with an aggregate value of up to $ 5,000,000 .

1 unchanged sentence

Advances are subject to certain limitations, including that Yorkville will not purchase any shares that would result in it owning more than 4.99 % of the Company’s outstanding common stock at the time of an Advance, or more than the number of shares registered under the registration statement in effect at the time of the Advance.

Of the gross proceeds, $ 9,104,950 was retained by the Company to fund operations.

2 unchanged sentences

See Note 6 – Prepaid Advance Liability, for details related to a supplemental agreement to the SEPA.

During the six months ended June 30, 2024, the Company issued an aggregate of 79,650 shares of immediately vested common stock with a grant date value of $ 27,141 for legal services.

During the six months ended June 30, 2024, the Company issued 454,627 shares of common stock upon the vesting of restricted stock units previously granted.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended June 30, 2024, the Company issued 30,000 shares of immediately vested common stock with a grant date value of $ 17,400 as equity compensation to its independent members of the Board of Directors.

At the Market Offering

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock for aggregate gross proceeds of up to $ 20,000,000 in “at the market” offerings through or to the Agent.

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from the Company of 3 % of the gross proceeds of any shares of common stock sold pursuant to the ATM.

During the nine months ended September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the ATM for aggregate gross proceeds of $ 3,431,090 .

During the nine months ended September 30, 2024, the Company issued an aggregate of 241,650 shares of immediately vested common stock with a grant date value of $ 61,161 for legal services.

During the nine months ended September 30, 2024, the Company issued 30,000 shares of immediately vested common stock with a grant date value of $ 17,400 as equity compensation to its independent members of the Board of Directors.

During the nine months ended September 30, 2024, the Company issued an aggregate of 80,000 shares of immediately vested common stock with a grant date value of $ 26,400 for consulting services.

During the nine months ended September 30, 2024, the Company issued 617,127 shares of common stock upon the vesting of restricted stock units previously granted.

See Restricted Stock Awards , for details related to restricted equity grants and Note 6 - Prepaid Advance Liability for details related to additional share issuances.

2 unchanged sentences

The issuance of up to 1,000,000 shares of Non-Convertible Series A Voting Preferred Stock was previously approved and authorized by a vote of the majority stockholders of the Company.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Holders of Non-Convertible Series A Voting Preferred Stock shall not be entitled to dividends, shall not convert into another series or class of stock of the Company and have no rights to distributions in the event of any liquidation.

1 unchanged sentence

Treasury Stock

As of June 30, 2024 and December 31, 2023, the Company has 131,162 shares held in treasury recorded at their cost of $ 296,222 .

A summary of warrants activity during the six months ended June 30, 2024, is presented below:

As of September 30, 2024 and December 31, 2023, the Company has 131,162 shares held in treasury recorded at their cost of $ 296,222 .

A summary of warrants activity during the nine months ended September 30, 2024, is presented below:

Outstanding, January 1, 2024

Outstanding, June 30, 2024

Exercisable, June 30, 2024

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of outstanding and exercisable warrants as of June 30, 2024, is presented below:

Outstanding, September 30, 2024

Exercisable, September 30, 2024

A summary of outstanding and exercisable warrants as of September 30, 2024, is presented below:

Warrants Outstanding

2 unchanged sentences

See Note 9 – Notes Payable for additional details related to the 2024 warrant issuances.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

A summary of stock options activity during the six months ended June 30, 2024, is presented below:

A summary of stock options activity during the nine months ended September 30, 2024, is presented below:

Outstanding, January 1, 2024

Outstanding, June 30, 2024

Exercisable, June 30, 2024

The following table presents information related to stock options as of June 30, 2024:

Outstanding, September 30, 2024

Exercisable, September 30, 2024

The following table presents information related to stock options as of September 30, 2024:

Options Outstanding

5 unchanged sentences

$ 2.05 - $ 2.44

For the three and six months ended June 30, 2024, the weighted average grant date fair value per share of options granted was $ 0.21 and $ 0.20 , respectively, compared to $ 0.48 and $ 0.74 , for the three and six months ended June 30, 2023.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2024, the weighted average grant date fair value per share of options granted was $ 0.20 , compared to $ 0.30 and $ 0.52 for the three and nine months ended September 30, 2023, respectively.

No options were granted during the three months ended September 30, 2024.

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model.

1 unchanged sentence

For The Three Months Ended

For The Six Months Ended

For The Nine Months Ended

September 30,

Risk free interest rate

2 unchanged sentences

3.92 % - 5.40

3.92 % - 4.52

Expected term (years)

7 unchanged sentences

Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

As of June 30, 2024, there was $ 238,418 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 2.1 years.

As of September 30, 2024, there was $ 146,091 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 1.89 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Awards

The following table presents information related to restricted stock awards activity during the six months ended June 30, 2024:

The following table presents information related to restricted stock awards activity during the nine months ended September 30, 2024:

Weighted Average

2 unchanged sentences

( 2,168,508 )

Non-vested RSAs, June 30, 2024

During the six months ended June 30, 2024, the Company issued 2,168,508 restricted stock units in exchange for the same quantity of restricted stock awards.

( 1,062,500 )

Non-vested RSAs, September 30, 2024

During the nine months ended September 30, 2024, the Company issued 2,168,508 restricted stock units in exchange for the same quantity of restricted stock awards.

The exchange of RSAs for RSUs did not result in a modification of any other terms, such as the grant date fair value or vesting period.

As of June 30, 2024, there was $ 1,134,833 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 0.91 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of August 20, 2024, the President and Chief Operating Officer (the “COO”) resigned from all positions held with the Company, and the Company agreed to provide the COO with certain separation benefits, which include accelerated vesting of the final tranche of his restricted stock award (“RSA”), consisting of 500,000 unvested shares, previously granted.

As a result, the Company reversed $ 435,000 in amortization expense related to the unvested award.

The fair value of the previously unvested modified award on the modification date was $ 110,000 , which was calculated by multiplying the stock price on the modification date ($ 0.22 ) by the number of shares receiving accelerated vesting ( 500,000 shares).

Accordingly, the Company recorded restricted stock expense related to the modification of the RSA.

See Note - 11 Commitment and Contingencies - Separation and General Release Agreement.

As of September 30, 2024, there was $ 212,771 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 1.55 years.

Restricted Stock Units

The following table presents information related to restricted stock units (“RSUs”) activity during the six months ended June 30, 2024:

The following table presents information related to restricted stock units (“RSUs”) activity during the nine months ended September 30, 2024:

Weighted Average

Shares of Restricted

Non-vested RSUs, January 1, 2024

RSAs exchanged for RSUs

Non-vested RSUs, June 30, 2024

As of June 30, 2024, there was $ 4,202,362 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 2.68 years.

( 1,125,000 )

Non-vested RSUs, September 30, 2024

Vested RSUs undelivered September 30, 2024

To date, RSUs have only been granted to employees in accordance with the Company’s 2018 Equity Incentive Plan.

Pursuant to the terms of the restricted stock unit agreements, the vested but undelivered units are to be settled in November 24, 2024, and January 1, 2026.

As of September 30, 2024, there was $ 2,737,474 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 2.60 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

During the three and six months ended June 30, 2024, the Company recognized stock-based compensation expense of $ 909,026 and $ 1,754,955 , respectively, related to restricted stock awards, restricted stock units, stock options and stock issued for services, of which $ 870,837 and $ 1,678,942 , respectively, is included within selling, general and administrative expenses, and $ 38,189 and $ 76,013 , respectively is included within research and development expenses in the unaudited condensed consolidated statements of operations.

During the three and six months ended June 30, 2023, the Company recognized stock-based compensation expense of $ 964,201 and $ 1,966,929 , respectively, related to restricted stock awards, restricted stock units, stock options and stock issued for services, of which $ 927,375 and $ 1,831,370 , respectively, is included within selling, general and administrative expenses, and $ 36,826 and $ 52,986 , respectively is included within research and development expenses in the unaudited condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three and six months ended June 30, 2024 and 2023:

During the three and nine months ended September 30, 2024, the Company recognized stock-based compensation expense of $ 56,199 and $ 1,811,156 , respectively, related to restricted stock awards, restricted stock units, stock options and stock issued for services, of which $ 25,561 and $ 1,704,505 , respectively, is included within selling, general and administrative expenses, and $ 30,638 and $ 106,651 , respectively is included within research and development expenses in the unaudited condensed consolidated statements of operations.

During the three and nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $ 846,633 and $ 2,730,989 , respectively, related to restricted stock awards, restricted stock units, warrants and stock options, of which $ 560,139 and $ 2,391,509 , respectively, is included within selling, general and administrative expenses, and $ 286,494 and $ 339,480 , respectively, are included within research and development expenses on the unaudited condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three and nine months ended September 30, 2024 and 2023:

For The Three Months Ended

For The Six Months Ended

Common stock for services (includes accrued, unissued shares)

For The Nine Months Ended

September 30,

Common stock for services

Accrued issuable equity (common stock)

True up to accrued issuable equity

Amortization of stock options

3 unchanged sentences

The Company may be involved in litigation and arbitrations from time to time in the ordinary course of business.

As of June 30, 2024, the Company was not involved in any ongoing litigation.

As of September 30, 2024, the Company was not involved in any ongoing litigation.

The Company records legal costs associated with loss contingencies as incurred.

Settlements are accrued when, and if, they become probable and estimable.

Separation and General Release Agreement

On August 20, 2024, the Company entered into a Separation and General Release Agreement with the President and Chief Operating Officer of the Company, and resignation from all other appointments and positions held with the Company and any of its affiliated entities.

The COO released the Company from any and all claims he may have against the Company, and the Company agreed to provide certain separation benefits, including (i) a one-time payment of $ 99,551 , subject to legally required payroll withholdings/deductions, (ii) early settlement of 375,000 vested restricted stock units (“RSUs”) previously granted and (iii) accelerated vesting of the final tranche of a restricted stock award (“RSA”), consisting of 500,000 unvested shares, previously granted.

The equity component of the Agreement is to be delivered on November 25, 2024.

See Note 10 – Stockholders’ Equity (Deficit) – Restricted Stock Awards for additional information.

Contingent Loss

Equipment deposits at September 30, 2024, represent amounts paid to a vendor as a downpayment for the manufacture of an automated manufacturing system (the “System”).

To date, the System has not been delivered and the Company and the vendor are in continuing discussions.

There can be no assurance that the Company will recover the full amount of the equipment deposit.

At this time a loss is not considered probable.

Even if a loss were to occur, at this time the Company is not able to estimate the dollar amount of a potential loss.

KULR TECHNOLOGY GROUP, INC.

2 unchanged sentences

NOTE 12 - SUBSEQUENT EVENTS

Independent Contractor Agreement

Effective October 1, 2024, the Company entered into an independent contractor agreement whereby the contractor will provide consulting services for economic development incentives, grant review, and state governmental affairs within the state of Texas.

The Company has agreed to compensate the contractor with a one-time retainer of $ 10,000 , plus quarterly payments of 50,000 shares of common stock and a commission payout of up to 5 % of awards the contractor secures for the Company.

The agreement may be cancelled by either party by giving 10 days notice.

Repayment of Note Purchase Agreement

On October 31, 2024, the Company repaid the remaining balance of a note payable pursuant to a note purchase agreement entered into on April 9, 2024.

The Company paid $ 102,033 , of which $ 100,000 was applied to the principal balance and $ 2,033 was applied to the outstanding interest.

At the Market Offering

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock for aggregate gross proceeds of up to $ 20,000,000 in “at the market” offerings through or to the Agent.

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from the Company of 3 % of the gross proceeds of any shares of common stock sold pursuant to the ATM.

During the period from July 3, 2024, through August 9, 2024, the Company issued a total of 4,953,867 shares of common stock pursuant to the ATM for aggregate proceeds of $ 1,416,940 .

Merchant Cash Advance

On July 11, 2024, the Company entered into a merchant cash advance agreement (the “Third Cash Advance Agreement”) whereby the Company received $ 758,850 of cash (net of underwriting fees of $ 40,000 and $ 201,150 used to pay the remaining balance of the first merchant cash advance), with the obligation to repay a total of $ 1,350,000 over forty-three weekly payments of $ 31,395 , beginning July 18, 2024.

The agreement contains an early payoff discount whereby the Company will owe $ 1,230,000 if paid by August 11, 2024, or $ 1,310,000 if paid by September 11, 2024.

The Company does not anticipate taking advantage of the early payoff discount and will continue making weekly payments over the original forty-three-week term.

In addition, the Third Cash Advance Agreement amended the Second Cash Advance Agreement to revise the repayment terms, whereby the weekly repayment amounts will be reduced from $ 26,820 to $ 15,620 and the repayment period will be extended from September 27, 2024, to November 15, 2024.

During the period from October 1, 2024 through November 12, 2024, the Company issued 13,045,200 shares of common stock for gross proceeds of $ 4,319,699 pursuant to the ATM.

Repayment of Merchant Cash Advances

During the period from October 1, 2024 through November 12, 2024, the Company repaid $ 313,487 of the merchant cash advances.

As of November 12, 2024, the outstanding balance of the merchant cash advances was $ 810,830 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements